Below is the edited transcript of Tulsian's interview with CNBC-TV18.
On Arvee Denim
This is an integrated company based in Ahmedabad, Gujarat having three plants. It is a vertically integrated textile maker with 78 million meters of denim and are making 43,000 tonne per annum of yarn. They also make 3.5 million pieces of apparels and about 18 million meters of non denim fabrics, which are used for bottom wear fabrics.
For FY12, it had an EPS of Rs 6. In the first half, the company has already clocked an EPS of Rs 13 and that Rs 13 is equally broken in both the quarters - close to Rs 7 in Q2 and Rs 6 in Q1, this may be because of cotton prices remaining quite low.
This financial performance is because of increase in margin with top-line of close to Rs 400 crore. For whole of FY13, the company is expected to post an EPS of about Rs 23-24. The share is now ruling at a PE of 3.5 times. The book value is quite robust and the debt is also not very high.
Large amount of about Rs 400 crore is used for financing their working capital. The performance overall is better and that is partly getting reflected in the financial performance of Arvind too. Arvee Denim is a significant player in the denim segment. The stock looks quite good from here on, one can expect a price target of about Rs 90 in next six months or so.
On Igarashi Motor
This company is into small permanent magnet, DC motors and gear motors. If one considers their product mix or sales performance, 73 percent of their products are exported to US and Europe. The annual report of the company for FY12 suggests that they have been very ambitious. The company targets doubling their sales turnover in next four years or so. So, one can expect a consistent improvement in the top-line by a CARG of 18-20 percent over the next four years.
On the financial performance front, for H1 the top-line was close to Rs 145 crore and has given an EPS of about Rs 5.30. Going by their financial performance, share holding pattern, 64 percent stake is held by the promoters and about 18-19 percent stake held by three investors. The product profile of the company is very good; globally demand is very good. With better demand, the company also seems to be having a good pricing power.
Expected EPS of Rs 10 plus for FY13 can move to Rs 13-14 in FY14. Taking all this into account, the stock looks quite reasonable at a PE multiple of 7 on current year earnings. At historic earnings, it is ruling at 5.5-6 times. So, the share may touch Rs 100 in next six months or so.
Disclosure: SP Tulsian has no holdings in the stocks discussed.